Shares in Marston’s (MARS) tumbled 8 per cent after the pub group sounded a note of caution within a trading update for the four months to 20 January. The group warned that the 6.2 per cent hike in the national minimum wage from April 2020 - which is higher than expected - will increase costs by around £2-3m in the second half.
Nonetheless, Marston's posted steady like-for-like sales growth for the period under review, up 1 per cent from the same period last year - with continued drinks growth tempered by weaker food sales. The Christmas period was more upbeat with like-for-like sales growth of 4.5 per cent.
Its beer company’s volumes lagged behind last year’s performance, reflecting a weaker performance in the off-trade in December. But despite the decline, management said that earnings are still in line with their expectations.
The overall picture looks steady enough, as the plan to cut net debt by £200m within the next 3 years seems to be on track. The group noted that it has accelerated its disposal programme, having completed or exchanged £60m worth of disposals, and has upgraded its target to £85-90m. It aims to generate annual net cash flow of at least £50m, after dividends, by 2023.
Broker Peel Hunt has cut its forecast for adjusted pre-tax profits in 2020 by £4.5m to £96.6m, on the basis of the increased national living wage, softer like-for-like sales and dilution from the pubco’s continued disposals.
